Paragraphs 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Paragraphs 4.12 to 4.15 of the Policy answer four practical questions for an Advance Authorisation holder: how must the inputs actually used be shown at the time of export, when must an input be imported before export, which duties are exempted on import, and what happens to inputs on which duty was paid. Paragraphs 4.29 and 4.51 of the Handbook add the drawback position when an application is rejected and the duty on keeping accounts.
This article is based on the chapter-wise text of the Foreign Trade Policy, 2023 published on the DGFT website, as consulted on 2 October 2026; the copy carries no "updated up to" date. The procedure is taken from Chapter 4 of the Handbook of Procedures, 2023 as published on the DGFT website (file of July 2026), consulted on 2 October 2026. Later Notifications, Public Notices and Trade Notices should be checked. Exporters who want the shipping bill endorsements and the refund position reviewed together can start with our GST refund on exports service.
Where a SION allows a generic or alternative input, the specific input and quantity must be endorsed in the shipping bill and must match the bill of entry, or the authorisation will not be redeemed (paragraph 4.12). Imports are exempt from the duties listed in paragraph 4.14, with a carve-out for some supplies. Drawback is available on duty-paid inputs that the application names (paragraph 4.15). Records are kept in Appendix 4H or 4I (Handbook paragraph 4.51).
Accounting of inputs: paragraph 4.12
Paragraph 4.12(i) deals with a SION that permits either a generic input or an alternative input. Unless the name of the specific input, together with the quantity used in manufacturing the export product, is indicated or endorsed in the relevant shipping bill, and the inputs so endorsed are within the quantity specified and match the description in the relevant bill of entry, the authorisation will not be redeemed. The paragraph puts it in one line: the name or description of the input used in the authorisation must match exactly the one endorsed in the shipping bill.
The other sub-paragraphs build on this:
| Sub-paragraph | Rule |
|---|---|
| 4.12(ii) | Where a SION gives a single quantity against a group of more than one input, the quantities allowed for import are in proportion to the quantities actually used in production, within the overall quantity for the group. The proportion must be shown clearly in the shipping bills. |
| 4.12(iii) | At the time of the Export Obligation Discharge Certificate or redemption, the Regional Authority allows only inputs specifically indicated in the shipping bill with their quantity. |
| 4.12(iv) | The same applies to supplies to SEZs and supplies made as deemed exports. The details must be shown in the relevant bill of export, ARE-3, the Central Excise certified invoice, the import document or the tax invoice prescribed under the GST rules. |
The effect is that the shipping bill is the evidence. A holder that exports first and tries to explain the input mix later may find the Regional Authority allowing only what the bill shows. For the shipping bill itself, see our guide to shipping bill documentation. For the SION, minimum value addition and the inputs, see Advance Authorisation: inputs, SION and minimum value addition.
Pre-import condition: paragraph 4.13
Under paragraph 4.13(i), the DGFT may by Notification impose a pre-import condition for inputs under Chapter 4. Under 4.13(ii), the items subject to it are listed in Appendix 4-J or are as indicated in the SION. A pre-import condition means the input has to be imported before the export it goes into; check the Appendix and the SION entry for your input. Appendix 4-J is named only.
Duties exempted: paragraph 4.14
Imports under an Advance Authorisation are exempted, wherever applicable, from the duties the paragraph lists. The copy prints the list as follows, and this article gives it as printed:
- Basic Customs Duty;
- Additional Customs Duty;
- Education Cess;
- Anti-dumping Duty;
- Countervailing Duty;
- Safeguard Duty; and
- Transition Product Specific Safeguard Duty.
Two more points sit in the same paragraph.
- Carve-out. Imports against supplies covered under paragraph 7.02(c) and (f) of the Policy are not exempted from the applicable Anti-dumping Duty, Countervailing Duty, Safeguard Duty and Transition Product Specific Safeguard Duty, if any.
- Integrated tax and compensation cess. Imports under an Advance Authorisation, for physical as well as deemed exports, are also exempt from the whole of the integrated tax and the compensation cess leviable under sub-section (7) and sub-section (9) respectively of section 3 of the Customs Tariff Act, 1975.
Some of these names, such as Education Cess, and the reference to compensation cess are printed in the chapter file as they are; they may not describe the levy as it stands today. The present levy should be checked on the Customs side before relying on the list. This article states no rates, and the Customs Act power to exempt is in section 25 of the Customs Act, 1962.
Drawback on duty-paid inputs: paragraph 4.15
Drawback, at the rate determined and fixed by the Customs authority under the rules of the Department of Revenue, is available for duty-paid imported or indigenous inputs that are not specified in the norms but are used in the export product. To use this, the applicant must show clearly the details of the duty-paid input in the application for Advance Authorisation. The Regional Authority then endorses the same details in the condition sheet of the authorisation. No drawback rate is given here; see duty drawback: rates, claim process and brand rate and, on the Customs Act power, section 75 of the Customs Act, 1962.
What the Handbook adds
Paragraph 4.29: rejected application. Where shipping bills were filed and processed under an Advance Authorisation, and the application is rejected or modified by the Regional Authority, the Customs authorities may permit drawback under the rules of the Department of Revenue. The word is "may": the paragraph gives the Customs authorities the discretion.
Paragraph 4.51: accounts. Every holder must maintain a true and proper account of consumption and utilisation of goods imported or procured domestically without payment of duty, against each authorisation, as prescribed in Appendix 4H or 4I, as applicable. The records are filed online at the beginning of each licensing year for all authorisations that were redeemed in the previous licensing year. Appendices 4H and 4I are named only.
The Policy is made under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (section 5 of the FTDR Act); the Handbook is issued by the Director General under section 6 (section 6 of the FTDR Act). The Policy is not a statute; it binds through the Act and the conditions of each authorisation.
A worked example
Sharma Fasteners Private Limited, an invented manufacturer, holds an Advance Authorisation for a product whose SION allows alternative inputs. It imports the first alternative but uses the second in a batch it exports. Under paragraph 4.12(i), it must endorse the actual input and quantity in that shipping bill, and the description must match the bill of entry. If it does not, the Regional Authority may allow only what the bills show at redemption (paragraph 4.12(iii)). Separately, it uses one duty-paid input that is not in the norms. Under paragraph 4.15 it named that input in its application, the Regional Authority endorsed it in the condition sheet, and drawback becomes available on it at the rate fixed by Customs.
Need help with the shipping bill and refund side?
Mismatched input descriptions and unclaimed duty-paid inputs usually surface only at redemption. Our team can check how the endorsements, the drawback position and any GST refund on exports fit together through our GST refund on exports service.
Key takeaways
- The specific input and quantity must be endorsed in the shipping bill and match the bill of entry (paragraph 4.12(i)).
- The same rule applies to supplies to SEZs and to deemed exports (paragraph 4.12(iv)).
- Pre-import conditions come by DGFT Notification and are listed in Appendix 4-J or the SION (paragraph 4.13).
- Paragraph 4.14 lists the duties exempted and carves out some supplies under paragraph 7.02(c) and (f); check the present levy of the cess it names.
- Drawback on duty-paid inputs needs the input named in the application (paragraph 4.15).
- Keep accounts in Appendix 4H or 4I and file them each licensing year for authorisations redeemed in the previous one (Handbook paragraph 4.51).
Read next
- Paragraphs 4.00 to 4.03 and 4.05 of the Foreign Trade Policy, 2023: Advance Authorisation basis and eligible applicant
- Paragraphs 4.08 to 4.10 and 4.19 of the Foreign Trade Policy, 2023: value addition, mandatory spares and buyer-supplied inputs
- Paragraph 4.16 of the Foreign Trade Policy, 2023: actual user condition
- Duty drawback vs RoDTEP: which to claim
Disclaimer: Based on the chapter-wise text of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023 published on the DGFT website, and on the later Notifications named in this article, as consulted on 2 October 2026. The copies carry no "updated up to" date. Notifications, Public Notices, Trade Notices, the ITC(HS) schedules, Appendices and forms change often; the current text on the DGFT website should be checked before acting. This article is general information, not legal advice; check the official text before acting.